Political notes: A closer look at the county's property tax rate debate

The property tax rate is usually one of the most hotly debated aspects of the county budget process each year, and 2020 was no different.

In a 4-3 vote Tuesday, the County Council adopted the rate suggested by County Executive Jan Gardner (D) in her proposed operating budget: $1.06 per $100 of assessed value.

That decision set off a firestorm of debate in the local political channels on social media, as many claimed the council voted to raise property taxes on residents during the middle of the coronavirus pandemic.

What actually happened is a little more complex, and involves the state Department of Assessments and Taxation (SDAT). Even though the majority of council members voted to keep the tax rate level, county residents who have had their homes re-assessed by SDAT — and saw an increase — will pay more in property taxes.

Still, the Republican members of the council — in what has been one of the few, if not only, party-line votes since the new council was seated in December 2018 — argued the constant yield tax rate should be adopted. The constant yield rate means the rate would be lowered to a number that would generate the same property tax revenue for the county as the prior fiscal year. This year, that rate was $1.0344 per $100 of assessed value.

Council members spent almost an hour debating where the tax rate should be set. Here is a look at just some of what each of them argued.

Council Vice President Michael Blue (R-District 5)

Blue said due to the “unprecedented” times of the coronavirus pandemic, council members should do their part to provide some relief to county taxpayers, and adopt the constant yield tax rate.

Blue recounted a recent conversation he had with one of his customers.

“Of the taxes that anybody will pay, property taxes, she said, are the only tax that you could potentially recoup over a period of time, whether you have more borrowing power, more equity, or your property is worth more,” Blue said. “I agree with that. I don’t know that it’s an airtight argument, but if you look at all the taxes we pay, that’s really the only one you may be able to recoup over a period of time.”

Councilman Phil Dacey (R-At-large)

One of Dacey’s main arguments was that if council members weren’t going to lower the tax rate and provide some relief during the pandemic, then he couldn’t see them ever lowering it.

“This is the time, we’re literally in an emergency right now,” Dacey said. “And we’re talking about taking more money out of people’s households, to give money to the government ... in my view, that’s wrong, I think we should be talking about ways to put more money in people’s pockets in these tough times.”

Councilman Jerry Donald (D-District 1)

Donald argued that thousands of new homes coming into the county housing inventory this past year was a key part of why assessments may be going up for many property owners.

He also said the county has done wise budgeting and built up reserve accounts and established a AAA bond rating for the county, which saves taxpayer money when the county has to borrow for capital projects. He was comfortable with staying at the proposed rate.

“If we get through this crisis without having to go ... deeply into reserves ... we will show that we are maybe the best managed county in the United States,” Donald said of the county’s financial outlook.

Councilwoman Jessica Fitzwater (D-District 4)

Fitzwater pointed to the “quality of life” argument for why assessments, and thus taxes, go up. More specifically, she believes that because the county offers an array of services, amenities and strong schools, property values continue to increase.

Fitzwater emphasized she was only speaking for herself about paying an extra $7 a month in property taxes due to the council adopting the constant rate, and not the constant yield.

“I am more than happy to keep paying that extra $7 per month to make sure that Frederick County keeps being the great place that it is to live,” Fitzwater said.

Councilman Kai Hagen (D-At-large)

Hagen provided some historical perspective on why he felt the constant rate property tax was necessary.

He was part of the Board of County Commissioners from 2006-10, that had to make many cuts during the Great Recession.

“I’m expecting that we will have some difficult budgets ahead ... looking at the next two years, looking at where those resources are going, I think we’re going to make some hard choices about what our priorities are, and what we’re going to be spending on,” Hagen said.

Council President M.C. Keegan-Ayer (D-District 3)

Keegan-Ayer, who has had the responsibility of leading the council through virtual meetings for more than a month, perhaps had the most philosophical or broad-based argument for why to keep the constant rate for property taxes. Those property taxes help pay for schools, sheriff’s deputies, firefighters and emergency medical services, Keegan-Ayer said.

There’s also another important purpose to those tax dollars, she said.

“The government provides a safety net under people during times like this,” Keegan-Ayer said of the pandemic. “... We need to make sure we’re able to provide that safety net that people expect from their government.”

Councilman Steve McKay (R-District 2)

McKay joined Dacey in taking the lead in trying to convince council members the property tax rate should be reduced to the constant yield. McKay made several arguments about adopting the constant yield, but one of the broader ones was the county could afford to do so, because it had high reserves and property and income tax revenue come in over millions of dollars higher than expected in recent years.

“Adopting constant yield this year doesn’t mean it’s going to flatten our revenue year after year after year,” McKay said. “Our property tax revenues would still increase because assessed values are increasing ... what I’m talking about when I advocate for constant yield this year is reducing the rate of growth a little.”

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Steve Bohnel is the county government reporter for the Frederick News-Post. He can be reached at sbohnel@newspost.com. He graduated from Temple University, with a journalism degree in May 2017, and is a die-hard Everton F.C. fan.

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(13) comments

Radical thought moment: Why do we have this model of taxation? At whatever rate it is set at, you basically have a tax on a non performing 'asset'. I put asset in quotes because after the high fees of buying, selling, impact fees, etc, how much money in dividends or interest actually makes its way into your bank account on a yearly basis from your house? Or for any given year after living there? Zero.

Let's run some numbers. 100K taxable income has basically a 7.5% State tax and 3.75% local. Call it 11%, so $11K goes out of your income and off to the State coffers where some of it goes to good and proper places and some to not so great things. Your 300K home is assessed at $1/1000 which comes out to $3000 a year. And that is payable from where? Your taxable income and savings of course. So pick a number for home value if you must like at time of sale and that amount is added into the income tax. Or whatever model you can dream up, but stop taxing a non performing asset.

Do we really need the older generation losing homes over rising assessments? Local Governments eyeing rundown neighborhoods because they crave the 'growth factor'? HOAs screaming about uncut grass and the wrong color screen door lowering their property values? I realize it is a slick and painless way for money to flow to the State, but really, what is the human cost at the end of it all?

None of this discussion focused on the actual budget costs and what that percentage is. All services go up as the cost of labor, material, services, etc. go up. Where is that addressed? And what is the percentage of reserves along with what amount should be in reserves? Without actual facts how can anyone say not enough, too much or just right?

Adding 2,000 houses with 5,000+ new residents justifies an uptick in overall tax revenue. Two thirds of county residents will see no change in their tax bill. I could get behind some of the local Republican efforts if it weren’t so full of half truths and outright lies.

Couple points for you. I did the math on how much new homes were contributing to the additional property tax revenue, it was only 30%. 70% of the projected property tax revenue increase for FY21 is from rising assessments. Second, you’re incorrect about two thirds of homeowners seeing no change in their tax bills. You’re probably basing that on the fact that only one third of the county is reassessed each year. However, any upward change in assessment is phased in over three years. So, all properties whose value rose over the last few assessments see rising taxes each year, as those assessments phase in.

Ok then, I stand corrected. But is there a third option, other than constant rate or constant yield? If our population continues to rapidly increase, the budget must increase if we are to maintain quality of life in FredCo. The RCC cries foul when income tax projections increase as well. But many of these same RCC old guard members supported the last BOCC that wanted to open the floodgates and expand the tax base. It seems more than a little disingenuous. I just want honest debate from both sides, and I do appreciate that we get that from you Steve. I hope you will consider throwing your hat in the ring for County Executive in 2022.

Thank you fnpzwack. I do try to approach these debates honestly and with objective information, rather than the same old political arguments. I don't disagree with you about a third option. I would be perfectly content if we could reduce the property tax rate somewhere in between constant yield and constant rate. That just hasn't been possible either. The bottom line is that during heady economic times, the argument was that we couldn't reduce our revenues (with a tax cut) because we needed to build reserves. Then in challenging economic times, the argument was that we couldn't cut the tax because we needed the revenue for all the programs supporting the citizens. When you put those arguments together, what I was being told was that the County could NEVER reduce taxes, and I just don't accept that position.

You are correct people who had there homes reassessed in the last year or 2 would see a drop because they are working with same assessed value but lower rate with constant yield. People who had their homes reassessed in the last 12 months would see an increase(all depends on the value increase) because even though the rate went down the value went up, but their increase will be less than what it would be with keeping the rate the same. If the value increase is small enough they may still see a decrease

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